Your Subscription to BusinessWeek Is About to Expire

question 23

Multiple Choice

Your subscription to BusinessWeek is about to expire. You plan to subscribe to the magazine for the rest of your life. You can renew it by paying $50 annually, beginning immediately, or you can get a lifetime subscription for $500, also payable immediately. Assuming that you can earn 6.525% on your funds and that the annual renewal rate will remain constant, how many years must you live to make the lifetime subscription the better buy?

• A) 12
• B) 15
• C) 10
• D) 18

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Definitions:

Dividend Yield

A financial ratio that indicates how much a company pays out in dividends each year relative to its share price.

Return on Assets

A financial ratio that measures the efficiency of a company in generating profit from its assets.

Basic Earnings Per Share

A financial metric that calculates the amount of net income earned per share of stock outstanding.

Common Dividends

Dividends that are paid out to holders of common shares from a company's earnings, often fluctuating with the company's profitability.